IS BIGGER BETTER? PROFIT AND LOSS OF BROILER FARMS IN GOLESTAN PROVINCE OF IRAN

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1 Indian J. Anim. Res., 44 (4) : , 2010 AGRICULTURAL RESEARCH COMMUNICATION CENTRE ccjournals.com / indianjournals.com nals.com IS BIGGER BETTER? PROFIT AND LOSS OF BROILER FARMS IN GOLESTAN PROVINCE OF IRAN G.A. Ebdal*, A.R. Yazdani, F.. Shirani Bidiabadi and A. Shahabadi 1 Department of Animal Sciences, Gorgan University of Agricultural Sciences and Natural Resources, Golestan Province, Gorgan, Iran. ABSTRACT Like other industries the aim of poultry farmers is to obtain maximum profit from their resources. Profitable production of broiler is necessary condition for farmer to remain in the poultry industry.. In this study due to importance of poultry farming an attempt has been made to analyze profit level of small, medium and large scale poultry producers and obtain the most proper size of poultry farm for the region under the investigation as far as profit is concerned. Analyzing profit and loss account of different size poultry farms in eastern part of Golestan province showed that 52% of poultry farms in the area were profit making units, 42% were loss making units and 6% were active at the breakeven level. The results showed that the most profitable capacity of poultry farms in the eastern part of Golestan province were units with production capacity of 20000, analyzing loss making farms revealed that broiler farms with the capacity of were making highest level of loss. The result also indicated that the highest level of resistance against loss was shown by the broiler farms with the production capacity of Key words: Profit, Loss, Breakeven, Poultry. INTRODUCTION Poultry meat and eggs offer considerable potential for meeting human needs for dietary animal protein supply (Folorunsho and Onibi, 2005). Poultry are good converter of feed to the protein needed by human beings in a very short period of time. In the past poultry production was not considered to be as a full time agricultural occupation, however, at present due to fast money turnover poultry occupies an important place among agricultural and livestock enterprises ( Leseinde 1994). This single reason among others has made the poultry farming attractive and popular. Poultry production is one of the most promising sources of income to the farmers earning, while comprises two major categories, meat production and egg production. *Corresponding Author: Ghasemali. Ebdal. ghasemebdal@yahoo.com. 1 Department of Economics, Buali Sina University, Hamedan, Iran. Therefore, profitable production of broiler is necessary condition for farmer to remain in the poultry industry. In this study due to importance of poultry farming for country as provider of one of the main sources of animal protein to dietary intake of people and as income generating investment for farmers in eastern part of Golestan province an attempt is made to analyze profit level of small, medium and large scale poultry producers and obtain the most proper size of poultry farm for the region under the investigation as far as profit is concerned. Review of literature Despite the fact that little attention was given to analyzing of profit and profitability of poultry industry, there are set of literatures available on the

2 issue of profit and profitability of poultry industry. Amos (2006) in his work entitled Analysis of backyard poultry in Ondo state Nigeria studied profitability of backyard poultry in Ondo state of Nigeria and concluded that poultry production in traditional form was a profitable business he also concluded that layer keeping and egg production was more profitable compared to the broiler keeping and meat production. Maqbool (2005) studied market structure of poultry products in Faisalabad Pakistan, they concluded that most of profit margin of poultry products went to middlemen because farmers received low price for their products. Maqbool and. Bukhsh (2007), studied issues and economics of poultry production in Faisabad Pakistan, they concluded that unjust distribution of profit margin between stake holders in the area was main obstacle to further growth of poultry industry in Faisalabad region. Bamiro et al. (2009), in their work entitled vertical integration and profitability in poultry industry in Ogun and Oyo states, Nigeria, studied economics of vertical integration of poultry industry in Ogun and Oyo states of Nigeria. Their study examineds the production systems and analyses costs and returns to non-integrated and vertically integrated poultry farms in the above mentioned states of Nigeria. Their gross margin analysis revealed that the fully integrated poultry production systems have the highest gross margin while the nonintegrated poultry farms had the lowest gross margin per1000birds. Unang (2003), studied profitability of broiler industry in Tasikmalaya of Indonesia using Policy Analyzing Matrix (PAM), and concluded that The broiler systems in Tasikmalaya are privately and socially profitable. Vol. 44, No. 4, Groen et al. (1998) constructed a deterministic model which can be used for economic evaluation of poultry production system. Their model distinguishes four production stages: multiplier breeder, hatchery, commercial grower, and processor. They further stated that by changing exogenous parameters, the model could also be used to analyze profitability. Groen et al. model was further used by Fallah-Khair et al. (2009), to evaluate economic values of broiler breeders in Zanjan province of Iran; they used the model for evaluation of profit of the system. Sheppard (2004) studied economic structure of broiler production in UK. In his work Sheppard presented detail costs structure of broiler production in UK. Szentirmay (2007) analyzed supply chain elements of broiler industry including chicken growing (broiler growing) and the chicken slaughtering (producing fresh chicken meat products). His study analyzed the cost structure of these activities using the sales price level of live birds and chicken meat products to analyze the profitability of them. MATERIAL AND METHODS In this study both primary and secondary sources of data were utilized. The primary data were gathered basically through direct interviews with poultry farmers in the study area. Study area was of 5 districts located in the eastern part of Golestan Province (North Iran) including Aliabad Katool, Ramian, Azadshahr, Gonbad and Minodasht.Their main occupation and source of income in these districts were agriculture and its allied sector including poultry farming. In the study area 277 registered broiler farms were active in the year 2009 (Table 1). Table 1: Registered broiler farm in the eastern part of Golestan Province. Total Nominal Capacity Nominal Capacity Nominal Capacity Nominal Capacity and above N n

3 256 INDIAN JOURNAL OF ANIMAL RESEARCH Using random stratified sampling method total sample size of 47 poultry keepers were selected, and questionair regarding cost of production and revenue were distributed among the owners/managers, out of these question 9 were discarded due to inadequate or wrong answers, finally our sample size was reduced to 36 broiler farms out of 277, Table 1 shows detailed characters of this sample: The model: In order to calculate profit level of above mentioned poultry farms simple profit model is used in which π (profit) can be calculated using following equation: Ð = R-C R : Revenue C : Cost of production Revenue is obtained by multiplying market price of chicken by total weight of sold chickens as follows: TR= P T P In which: TR: Total Revenue P: Price per Kg of chicken sold. TP: Total product sold Cost of production is calculated using following equation: TC=C X1 +C X2 +C X3 +. +C X7 In which C X1, C X2, C X3,..C X7 stands for cost of factor of production used in the production process including; C x1 = Cost of day-old-chicks C x2 =Veterinary cost C x3 =Feed costs C x4 =Energy costs C x5 =Cost of equipment used C x6 = Staff costs C x7 = other costs Since our aim was to calculate the accounting cost of production of chicken meat, opportunity cost (shadow price of factors of production) factors of production was not considered at the time of cost calculation. In order to analyze profit and loss of broiler farms with different production capacities, Statistical Analysis Software (SAS/1998) was utilized. RESULTS TS AND DISCUSSION Our findings showed that out of total 36 broiler farms 52% were profit making, 6% were active at breakeven point level and 42% of under investigation broiler farms were loss making units (Table 2). Table 2: Frequency of broiler farms from stand point of Profit and Loss: Profit making Active at breakeven Loss making units level Units Number Percent 52% 6% 42% Source: Research Findings. In order to analyze profit making units, the level of profit of broiler farms were compared with each other (based on production capacity of farms) with the help of Statistical Analysis Software (SAS/ 1998). Initially net profit resulted from sale of chicken of all broiler farms with production capacity of 5000, 10000, and were compared with each other. Using LSD test at 1% significant level points out to the fact that there was significant difference between profitability of broiler farms with the capacity of and broiler farms with the capacity of 5000 and 10000, however there was no significant difference between profitability of broiler Table 3: Results of LSD test for profit making broiler farms. source mean cv b b ab a Means bearing different superscript differ significantly (P< 0.01).

4 Vol. 44, No. 4, farms with the capacity of and Result of LSD test also showed that there is no significance difference (at 1% level of significance) between broiler farms with the production capacity of and broiler farms with the production capacity of and 5000 (Table 3). In order to get better comparison, we compared profit earned by broiler farms per kg of chicken meat sold. Using LSD test to analyze profit per kg chicken meat sold by the broiler farms showed that there was significance difference at the level 1% between broiler farms with the production capacity of and broiler farms with production capacity of and 5000, but at 1% significance level there was no significant difference between broiler farms with the production capacity of and broiler farms with the production capacity of 5000, and (Table 4). It may be related to the managerial ability of managers/owners of broiler farms which is best suit to the broiler farms with the capacity of The profit earned by broiler farms with production capacity of was higher than profit earned by broiler farms with the production capacity of and 5000, however result of LSD test showed that there was no significance difference between level of profit per Kg of chicken meat sold by the broiler farms with the production capacity of and that of broiler farms with the production capacity of 5000 and (Table 4). After analyzing profit making broiler farms it was tried to analyze the loss made by loss making broiler farms with different production capacity. Analyzing average loss made by broiler farms with different production capacity using LSD test indicated that average loss made by farms with the capacity of (at 1% level of significance) has significant difference with the average loss made by the farms with the production capacity of 5000 and The result of LSD test at 1% level of significance also showed that there was no significant difference between average loss made by farms with the capacity of and There was also no significant difference between average lost made by farms with the production capacity of 20000, and 5000 (Table 5). Looking at the loss making farms more precisely revealed that broiler farms with the capacity of were making highest level of lost, which is due to lack of managerial skills and technical know how to control farms properly which in turn results in errors in controlling units. The lowest level of loss made by the broiler farms with the production capacity of which again in tune with the results obtained analyzing average profit of profit Table 4: Results of LSD test for profit per kg of chicken meat sold by profit making broiler farms. source mean Cv b b a ab 4.8 Means bearing different superscript differ significantly (P< 0.01). Table 5: Results of LSD test for lost making broiler farms. source mean cv b b ab a Means bearing different superscript differ significantly (P< 0.01). Table 6: Results of LSD test for per kg of chicken meat sold for loss making broiler farms. source mean cv ab b ab a Means bearing different superscript differ significantly (P< 0.01).

5 258 INDIAN JOURNAL OF ANIMAL RESEARCH making units that showed the optimum capacity of broiler farms in the study area was The result also indicates that the highest level of resistance against loss was shown by the broiler farms with the production capacity of which is very interesting result when we have broiler farms with the production capacity of 5000 in our study area. To get better picture of loss making broiler farms, losses per kg of chicken meat sold by broiler farms with different production capacity analyzed. Using LSD test for analyzing per kg losses of chicken meat sold by loss making broiler farms shows that at 1% level of significance there is significant difference between average losses made by farms with production capacity and average losses made by farms with production capacity of However, there was no significance difference between average losses per kg of chicken meat sold of broiler farms with other production capacities (Table 6). The high level of losses made per kg of chicken sold by broiler farms with the capacity of point out the lack of managerial skills to cope with emergency situation and to control farm condition. The low level of losses incurred per kg of chicken meat sold by the broiler farms with the capacity of suggest that this capacity was the optimum production capacity as far as losses were concerned. CONCLUSIONS In this research using a simple profit and loss model with the data gathered from broiler farms in eastern Golestan Province of Iran, we reach to the point that the size of poultry farm which could bring about highest profit (both in absolute term and in per kg of chicken meat sold) is farms with the production capacity of The result can be used also by the creditors including banking system that are providing subsidized credit to the agriculture and its allied sectors to direct their valuable resources to the most profitable farms. On the other hand the result of this type of research if employed correctly can encourage large investors to invest their monetary and non-monetary resources in broiler farms by the mean of expansion of profit margin of broiler farms with production capacity of and above. From the stand point of losses made by some of the broiler farms it was conceluted that the lowest level of loss incurred by the broiler farms with the production capacity of Therefore, for the investors who desire to minimize their risk the optimum level of investment is in broiler farms with the size of ACKNOWLEDGMENTS The authors appreciate the assistance of Directorate of Research, Gorgan university of Agricultural Sciences and Natural Resources for providing the finance and the facilities to conduct this research. REFERENCES Amos, T.T (2006). Analysis of Backyard poultry Production in Ondo State, Nigeria. International Journal of Poultry Science. 5 (3): Bamirol, M.O et al. (2009). Vertical integration and profitability in poultry industry in Ogan and Oyo States, Nigeria. J Hum EcoI, 27(2): Groen, A. F. Jiang, X. Emerson, D. A. and Verijken, A. (1998). Economic values in broiler breeding. Poultry Sci. 77: Fallah-Khair, A. (2009). Evaluation of Economic values of broiler breeders in partially integrated system. Journal of Food, Agriculture & Environment.7 (2): Folorunsho, O. R. and Onibi.G.B. (2005). Assessment of the nutritional quality of eviscerated waste from selected chicken types. Federal University of Technology. Akure, Nigeria. pp: 300. Laseinde, E. A. O. (1994). Tropical Agricultural Production Series. Woye and Sons Nig. Ltd. Ilorin, USA, Pp

6 Vol. 44, No. 4, Maqbool, A. (2005).A Case Study of Faisalabad, Pakistan. Department of Environmental and Resource Economics, Pakistan. Maqbool, A.A and Bukhsh, K. (2007). A Case Study of Faisalabad, Pakistan. Department of Environmental and resource economics, Pakistan. Sheppard, A. (2004). The Structure and Economics of Broiler Production in England. Special studies in Agricultural University of Exeter centre for rural research lafrowda house. No. 59. Szentirmay, A. (2007). Analysis of Some Important Cost Factor of Poultry Meat Production. University of West Hungary, Faculty of Agricultural and Food Sciences 49 (1). Unang, Ir. (2003). Profitability and Efficiency of the Broiler Industry in Tasikmalaya. Faculty of Agricultural University of Siliwangi Tasikmalaya. 27(2):